Interim Financial Report

Transcription

1 7 Interim Financial Report as of June 30, 2017

2 Group Key Figures in millions Q2/2017 Q2/2016 Change H1/2017 H1/2016 Change Group Segments Revenues Liquidity and financial position Share-related key figures 6) Average number of employees 15,731 15, % 15,664 14, % 1) Based on the operating business (without the segment Services/Holding). 2) Explanations with respect to the relevant key performance indicators on page 35 of the Annual Report ) Referring to the new headquarter building in Berlin as well as to the sale of the office building complex in Hamburg. 4) Capital expenditures on intangible assets, property, plant and equipment, and investment property. 5) As of June 30, 2017 and December 31, 2016, respectively. 6) Quotations based on XETRA closing prices. 7) Calculation based on average weighted shares outstanding in the reporting period (107.9 million; PY: million). 8) Based on shares outstanding as of June 30, 2017, excluding treasury shares (107.9 million; PY: million).

3 Interim Financial Report as of June 30, 2017 of the Axel Springer Group Summary of business performance and operating results Development of revenues and earnings Axel Springer can look back on a very successful first half of the year. During the reporting period, total revenues of 1,695.0 million were 6.9 % higher than the figure for the prior year. Adjusted for consolidation and currency effects, revenues were 4.7 % higher than the prioryear figure. The declines registered in the print business could again be more than compensated by growth in the digital media activities. During the first six months the EBITDA was million, and therefore 16.2 % above the prior-year figure ( million). A considerable increase within the Paid Models and Classified Ad Models compensated for the fall in revenues in the other two segments. At million, the EBIT was 16.4 % above the prior-year figure ( million). The adjusted earnings per share increased by 15.4 % to 1.38 (PY: 1.20). Comparison of business performance with our expectations Taking into account consolidation effects, which mainly had an impact on the first half of the year, the revenue increase of 6.9 % in the first half of the fiscal year corresponded to the expected increase in the mid single-digit percentage range. The advertising revenues in the reporting period driven by the development in digital media and a BILD special edition in the second quarter were as expected above the prior-year figure. The circulation revenues were also slightly up on the prior year, while the other revenues decreased as expected. Also for EBITDA and EBIT, part of the increase could be attributed to consolidation effects, mainly in the first half of the year. But even without these consolidation effects the development of EBITDA and EBIT exceeded expectations so that we can raise the previous forecast for the whole year. The adjusted earnings per share also developed beyond the expectations for the whole year. Here we also raise the forecast for the whole year. Outlook for 2017 For the 2017 fiscal year, we expect Group revenues to increase by an amount in the mid single-digit percentage range. We assume that the planned increase in advertising revenues will overcompensate the slight decline in circulation revenues and the decline in other revenues. After a very good first half of the year, we expect an increase in EBITDA in the high single-digit percentage range, having previously expected a rise in the mid to high single-digit percentage range. We continue to expect a rise in EBITDA in the Classified Ad Models and Marketing Models segments, while the earnings in the Paid Models segment should be roughly on par with the prior year-level. For the Services/Holding segment an EBITDA below the prior-year level is expected. For EBIT, due to higher depreciation, amortization and impairments, we expect an increase in the mid to high single-digit percentage range, having previously expected an increase in the mid single-digit percentage range. For the adjusted earnings per share, we now also expect a rise in the high single-digit percentage range, having previously expected an increase in the mid to high single-digit percentage range. Fundamentals of the Axel Springer Group The Group fundamentals described in the Annual Report published on March 9, 2017 are still applicable. In particular, we continue to consistently pursue a strategy of profitable growth, with the overarching goal of becoming the leading digital publisher. 2

4 Interim Management Report Economic Report General economic conditions and business developments General economic conditions General economic environment The International Monetary Fund (IMF) has observed a stabilization of global economic growth in the first half of The recovery of the world economy, which the IMF already forecasted in April, has further consolidated. The economic climate has improved, particularly in Europe, Japan, China and the Asian emerging markets. In the two important markets of the US and the UK a degree of uncertainty remains due to the ambiguous position of the American financial and economic policy and the planned Brexit. According to the ifo Institute, the upturn in the German economy has gained significant strength in the first half of the year Following more subdued growth of real GDP in the second half of 2016, growth in the first half of the current year was noticeably stronger at 1.7 %. A considerable share of this acceleration was due to industry. The ifo Institute s calculations show an increase in real investment in the first half of 2017 of 1.6 %. Foreign trade was particularly dynamic: Exports increased by 4.3 % in real terms in the first half of the year. Imports rose even more by 4.6 %. Private consumption grew in real terms by 1.2 %. The ifo Business Climate Index improved continuously in the first half of This applies both to the assessment of the business situation and to business expectations. The positive climate among German consumers also continued into the second quarter of Both the economic and income expectations as well as the tendency to acquire increased. According to the calculations of the Federal Statistical Office, consumer prices increased significantly in the second quarter of 2017 compared to the prior-year quarter by 1.7 %. In June 2017, the German Federal Employment Agency counted 2.5 million unemployed. This was 5.4 % less than the corresponding prior-year figure. The unemployment rate was 5.5 %. Press distribution market Whereas the circulation volumes of print media declined again in the first half of 2017, online media continued the growth trend of prior years. According to the study digital facts " published by the Working Group for Online Research (AGOF), 55.8 million people in Germany use the Internet today (Internet users within the last three months). That number represents 80.3 % of German-speaking residents aged 14 and older. Of the total regular Internet users, 71.0 % go online to obtain information about world events. After search engine use and dispatches, news offerings together with onlineshopping thus represent the third most important type of internet usage, ranking well above the use of social media networks. A further 62.8 % of users get information about regional or local news via Internet. Job listings are also one of the 20 most-used online categories. Alongside the wired Internet, the mobile Internet continues to gain in importance according to the study. In the last three months, 44.2 million people used mobile Internet (63.5 % of the German-speaking residential population of Germany over 14 years of age). In most cases (95.2 %) mobile Internet use occurred in addition to stationary use. According to IVW, the German Audit Bureau of Circulations, content portals of German print media were visited somewhat more frequently in the first half of 2017 compared to the corresponding previous period in The 20 most popular portals of German daily newspapers increased the number of visits by an aggregate of 15.6 %, whilst the visits to portals belonging to magazines rose by 5.1 %. The domestic press distribution market again showed a slight downward trend. The total paid circulation of newspapers and magazines was 4.9 % below the corresponding prior-year figure. Thanks to the price increases implemented in the past four quarters, however, circulation revenues declined by only 0.3 %. The 335 IVW registered daily and Sunday newspapers achieved total sales of 16.6 million copies per publication date. Compared to the prior-year figure, this corresponds to a decline of 4.8 %. Newsstand sales ( 10.4 %) as 3

5 Interim Management Report in the prior year suffered a much greater decline than subscription sales ( 3.7 %). Within the press distribution market, the demand for daily and Sunday newspapers as weighted for their respective publication frequencies declined by 4.7 %. Overall sales of general-interest magazines including membership and club magazines were 91.8 million copies per publication date. Compared to the prior-year figure, this corresponds to a decline of 4.5 %. IVW tracked a total of 757 titles ( 3.2 % compared to the prior-year figure). The demand for general-interest magazines weighted for their respective publication frequencies declined by 5.3 %. Business performance In January 2017, Digital Window, a majority-owned subsidiary of the Awin Group (formerly zanox Group) belonging to Axel Springer, acquired 100 % of the shares in ShareASale, a leading affiliate network in the US. The preliminary acquisition costs amounted to 44.0 million and in addition to the purchase price paid in the financial year, included an earnings performancerelated contingent purchase price liability of 9.5 million. In June 2017, Axel Springer Digital Classifieds France concluded a sales contract with the French media holding Spir Communication SA ("Spir") regarding the acquisition of the Spir subsidiary Concept Multimédia for a purchase price of 105 million in consideration of purchase price adjustments still to be determined depending on the net debt and working capital. The transaction is still awaiting approval from the French cartel authorities. In particular, Concept Multimédia, headquartered in Aix-en-Provence and Paris, runs under the core brand of Logic-Immo.com, a real estate portal in France as well as additional online portals for the brokerage of luxury real estate and new builds. Logic-Immo.com reached 2.9 million users in January currently under construction and the Axel-Springer- Passage for a sales price in the amount of 755 million. The sale of the Axel-Springer-Passage, which opened in 2004, is expected to be completed at the end of 2017 on payment of the purchase price of 330 million (pre-tax payments of approximately 85 million), and the handover of the building (residual book value of around 135 million). The new owners are Blackstone Real Estate Partners Europe V and QUINCAP Investment Partners. Following the sale, we will use a major part of the Passage as a tenant until the end of The sale of the Axel-Springer-Neubau is subject to completion of construction (total investment volume will be around 300 million), as well as the payment of the purchase price of 425 million (pre-tax payments of 30 million) and will in all likelihood take place at the end of Axel Springer will lease back the new building on a longterm basis from 2020 on. Financial performance of the Group During the reporting period, revenues were 1,695.0 million and therefore 6.9 % above the prioryear figure ( 1,585.3 million). The revenue development is partly affected by consolidation effects, especially due to the consolidation of emarketer and Land & Leisure. Adjusted for consolidation and currency effects, Axel Springer reported an increase in revenues of 4.7 %. The digital share of revenues was 70.6 % (PY: 66.7 %). Organic revenue development for digital media is illustrated in the table below. Consolidation and currency effects have been adjusted. Revenue Development Digital Media, Organic yoy H1/2017 Q2/2017 Digital Media 10.7 % 10.7 % In July 2017 we signed the contracts for the sale of the new building Axel-Springer-Neubau in Berlin, which is 4

6 Interim Management Report International revenues increased from million by 11.5 % to million and thus amounted to 49.8 % (PY: 47.7 %) of Axel Springer's total revenues. The increase in advertising revenues by 11.8 % to 1,187.6 million (PY: 1,062.4 million) was based on revenue growth in all three operating segments, whereby the growth of advertising revenue in Classified Ad Models again made the largest contribution. Adjusted for consolidation and currency effects, advertising revenues within the Group increased by 9.7 %. Advertising revenues as a proportion of total revenues was 70.1 % (PY: 67.0 %). Of total advertising revenues, 86.4 % were generated by digital media. Due to consolidation effects, total circulation revenues of million exceeded the prior-year value by 0.5 % ( million). Adjusted for consolidation and currency effects, they were 6.0 % below the prior-year figure. Circulation revenues as a proportion of total revenues were 18.6 % (PY: 19.8 %). The other revenues at million were 8.2 % below the prior-year value ( million). Consolidation effects also had an impact here. Adjusted for consolidation and currency effects, the other revenues were 4.9 % below the prior-year value. Other revenues as a proportion of total revenues were 11.4 % (PY: 13.2 %). Other operating income of 30.0 million was significantly below the prior-year level (PY: million). The prior year included, in particular, income relating to the establishment of the Ringier Axel Springer Schweiz AG ( million) as well as the sale of CarWale ( 83.3 million). Changes in inventories and internal costs capitalized increased to 41.6 million (PY: 34.7 million) and mainly related to comprehensive IT development projects to develop and expand our digital business models. Compared to the prior year, total expenses increased by 5.8 % to 1,592.3 million (PY: 1,504.9 million). The increase in purchased goods and services of 3.8 % to million (PY: million) is mainly the result of company acquisitions in the prior year. The ratio of purchased goods and services to total revenues decreased slightly to 28.8 % (PY: 29.6 %). Personnel expenses were million (PY: million) and 6.5 % above the level of the prior year. The increase is mainly attributable to an increase in personnel in the digital business models and a heightening effect on total amounts resulting from the acquisition and sale of subsidiaries. Depreciation, amortization, and impairments amounted to million and were 18.5 % higher than the prior-year figure of million due to consolidation related increases in depreciation, amortization and impairments from purchase price allocations, as well as higher investments in intangible assets. The other operating expenses were million, mainly due to the incorporation of acquired subsidiaries, and therefore above the prior-year level (PY: million). The income from investments came to 7.2 million (PY: 1.3 million). The operating income from investments included in EBITDA amounted to 9.7 million (PY: 8.1 million). The financial result of 1.7 million was slightly below the prior-year level (PY: 1.1 million). Income taxes in the first half of the year amounted to 62.8 million (PY: 64.3 million). The tax rate was 34.9 % (PY: 19.1 %). The prior year was influenced, in particular, by the mostly tax-neutral income in connection with the establishment of the Ringier Axel Springer Schweiz AG, as well as the lower-taxed income from the sale of CarWale. 5

7 Interim Management Report EBITDA rose compared to the prior year by 16.2 % to million (PY: million). The EBITDA margin increased to 18.7 % (PY: 17.2 %). The EBITDA of digital activities increased by 24.8 % from million to million. Based on the operating business, the digital business share in EBITDA therefore amounted to 77.1 % (PY: 72.1 %). EBIT increased compared to the prior year by 16.4 % to million (PY: million). Net income developed as follows: Net Income millions H1/2017 H1/2016 Change Net income % price allocations. Furthermore, in the prior year, non-recurring effects included income from the sale of business operations in the amount of million, particularly from the sale of CarWale as well as income from the disposal of the entire Swiss business in connection with the establishment of Ringier Axel Springer Schweiz AG. Financial performance of the operating segments Classified Ad Models All Business models which predominantly generate their revenues in online classified advertising are summarized in the Classified Ad Models segment. The segment is sub-divided into Jobs, Real Estate, and General/Other. Key Figures Classified Ad Models millions H1/2017 H1/2016 Change Revenues % Net income, adjusted 1) % Adjusted net income 1) from continuing operations attributable to shareholders of % Jobs % Real Estate % General/Other % EBITDA 1) % 1) Explanations with respect to the relevant key performance indicators see page 35 of the Annual Report ) Calculation based on average weighted shares outstanding in the reporting period (107.9 million; PY.: million). Non-recurring effects in the reporting period mainly included expenses relating to the Executive Board remuneration program 2016 (LTIP) of 6.0 million (PY: 1.2 million) and other effects from business combinations of 5.1 million (PY: 6.1 million), primarily resulting from subsequent effects of purchase EBITDA margin 40.7 % 40.4 % 1) Segment EBITDA includes non-allocated costs of 4.3 million (PY: 2.7 million). 6

8 Interim Management Report Revenues in the Classified Ad Models segment increased compared to the prior year by 15.6 % to million (PY: million). Alongside an operative improvement, particularly from job and real estate portals, consolidation effects primarily had an influence due to the incorporation of Land & Leisure in the General/Other sub-segment. Adjusted for consolidation and currency effects, the increase was 11.8 %. The currency effects mainly pertained to the job portal activities in the UK. The job portals achieved an increase in revenues of 12.4 %. Adjusted for consolidation and currency effects revenues increased by 15.2 %. Again, business in continental Europe primarily contributed to this growth. The real estate portals showed an increase of 7.9 %. Adjusted for consolidation and currency effects the increase was 12.9 %. The strongest growth was recorded in the Immowelt group. In the sub-segment General/Other, the revenue increase was primarily due to consolidation effects in group at 32.8 %. Adjusted for consolidation and currency effects, revenues increased by 3.6 %. EBIT in the Classified Ad Models segment rose by 14.5 % from million to million. Depreciation, amortization, impairments, and write-ups increased by 35.5 % to 23.2 million (PY: 17.2 million). Key Figures Classified Ad Models 2 nd Quarter millions Q2/2017 Q2/2016 Change Revenues % Jobs % Real Estate % General/Other % EBITDA 1) % EBITDA of the segment increased considerably by 16.6 % to million (PY: million). A significant part of this increase can be attributed to operational improvements in earnings. Adjusted for consolidation and currency effects, the increase was 13.3 %. The margin of 40.7 % was slightly higher than the prior-year value (40.4 %). EBITDA for the job portals increased by 11.9 % compared to the prior year. As in the case of revenues, the increase is primarily attributable to business in continental Europe. The real estate portals achieved the highest increase in EBITDA (21.9 %), mainly due to improvements in earnings in the Immowelt Group. The EBITDA growth in the General/Other sub-segment of 21.2 % is in particular attributable to consolidation effects in Group. EBITDA margin 40.9 % 41.7 % 1) Segment EBITDA includes non-allocated costs of 2.3 million (PY: 1.8 million). 7

9 Interim Management Report Paid Models Within Paid Models the national sub-segment of the Paid Models segment mainly comprises the BILD and WELT groups, and in the international sub-segment the content based and increasingly digitized media models in Europe and the USA. Key Figures Paid Models millions H1/2017 H1/2016 Change Revenues % National % International % Revenues in the Paid Models segment of million were 2.3 % above the value for the prior year ( million). The digital proportion of revenues was 32.6 %. At million, revenues in the National Paid Models were 3.5 % below the prior-year figure. What primarily contributed to this, with a revenue share of 77.2 %, was the market-induced declining print business. Its development in advertising revenues benefited from a BILD special edition in the second quarter for the 65 th anniversary of BILD with a circulation of 41 million that was distributed to almost all households in Germany. The revenues in National Paid Models could not escape the market environment and were 5.7 % below the prior-year value. Revenues in International Paid Models increased above all due to the initial consolidation of emarketer in the previous year by 22.9 % to million. Adjusted for consolidation and currency effects, revenues were 4.3 % above the prior-year figure. Continued good development in the case of the digital offers, in particular the very positive development of Business Insider, was able to more than compensate for the market-induced decline in most print activities. The digital proportion of revenues in International Paid Models was 60.0 %. EBITDA % EBITDA margin 15.3 % 11.7 % At million, EBITDA was 33.6 % above the prioryear figure ( 83.0 million). The significant increase in earnings was due to both national and international business, reinforced by the initial consolidation of emarketer in the prior year. Adjusted for currency and consolidation effects, the increase was 20.7 %. Compared to the same period last year, the segment margin increased from 11.7 % to 15.3 %. EBIT in the Paid Models segment increased by 37.9 % from 67.9 million to 93.7 million. Depreciation, amortization, impairments, and write-ups increased by 14.0 % from 15.1 million to 17.2 million. 8

10 Interim Management Report Key Figures Paid Models 2 nd Quarter Key Figures Marketing Models millions Q2/2017 Q2/2016 Change Revenues % millions H1/2017 H1/2016 Change Revenues % National % Reach Based Marketing % Performance Marketing % EBITDA 1) % International % EBITDA margin 9.0 % 11.2 % EBITDA % EBITDA margin 17.5 % 12.5 % Marketing Models In the Marketing Models segment, idealo, aufeminin and the Bonial Group, among others, are pooled in the reach-based marketing segment, whereas performancebased marketing consists of the Awin Group (formerly zanox Group). 1) Segment EBITDA includes non-allocated costs of 4.3 million (PY: 3.5 million). Revenues in the Marketing Models segment rose by 8.1 % to million (PY: million). Adjusted for consolidation and currency effects, the increase was 10.9 %. Revenues in Reach Based Marketing increased by 9.8 % to million. Adjusted for consolidation and currency effects, which resulted from the sale of Smarthouse Media in the prior year, growth was 13.8 %. The revenue in Performance Marketing increased by 7.3 % to million. This revenue growth was positively influenced by the initial consolidation of ShareASale from January This was partly offset by currency effects in respect of the British Pound in particular. Adjusted for consolidation and currency effects, growth was 9.5 %. 9

11 Interim Management Report EBITDA in the segment of 40.4 million was 13.2 % below the prior-year figure ( 46.5 million). In particular, the challenging market and competitive environment in the case of some of our activities in Reach Based Marketing contributed to this. The increase in earnings in Performance Marketing is attributable to the initial consolidation of ShareASale. The EBITDA margin in the segment was 9.0 % (PY: 11.2 %). EBIT in the Marketing Models segment decreased by 19.7 % from 39.7 million to 31.9 million. Depreciation, amortization, impairments, and write-ups for the reporting period increased by 25.1 % to 8.5 million (PY: 6.8 million). Key Figures Marketing Models 2 nd Quarter Mio. Q2/2017 Q2/2016 Change Umsatzerlöse % Reichweitenvermarktung % Performance Marketing % EBITDA 1) % Services/Holding Group services, which also include the three domestic printing plants, as well as holding functions, are reported within the Services/Holding segment. The Group services are purchased by internal, Group-wide customers at standard market prices. Key Figures Services/Holding millions H1/2017 H1/2016 Change Revenues % EBITDA Revenues in the Services/Holding segment decreased compared with the comparable prior-year period by 18.0 % due to market trends and were at 30.7 million (PY: 37.5 million). At 33.9 million, EBITDA was below the prior-year level ( 28.0 million). The main reason for the decline was the structural decline in business for the printing plants. EBIT in the Services/Holding segment was 50.9 million (PY: 46.1 million). Depreciation, amortization, impairments, and write-ups amounted to 17.0 million and were below the prior-year figure ( 18.0 million). Key Figures Services/Holding 2 nd Quarter EBITDA-Rendite 11.3 % 13.3 % millions Q2/2017 Q2/2016 Change Revenues % 1) Segment EBITDA includes non-allocated costs of 2.4 million (PY.: 1.8 million). EBITDA

12 Interim Management Report Liquidity Cash flow development Cash flow from operating activities in the first half of the year was million and therefore significantly above the value for the prior-year period ( million). The development resulted primarily from the positive development of operating results compensated by a lower decrease of trade receivables compared to the prior-year period. Cash flow from investing activities amounted to million (PY: million). In addition to increased investments in intangible assets and property, plant and equipment, the change was mainly due to the acquisition of ShareASale and the exercise of option rights to acquire non-controlling interest in Immoweb and Onet. Furthermore, in the prior year, payments from the premature repayment of the vendor loan granted to the FUNKE Mediengruppe, payments in connection with the sale of 2.3 % of our share in Do an TV Holding ( 55.3 million) and the receipt of the purchase price (less taxes) of 64.0 million from the sale of our shares in CarWale were included. The cash flow from financing activities of 9.0 million (PY: million) was in particular characterized by the payment of dividends to shareholders of Axel Springer SE and the taking out of loans (PY: repayment), primarily in connection with the reorganization of our Schuldschein loans (promissory note loans). Net liquidity and financing Net liquidity developed as follows during the reporting period: Net Liquidity/Debt millions H1/ Net liquidity/debt 1) 1, , ) Explanations regarding relevant key performance indicators on page 35 of the Annual Report In order to optimize our financing conditions, in May 2017, we improved the average rate of interest, extended the average term and significantly increased the financing volumes through the partial termination, transformation and new subscription of our existing Schuldschein loan. In this context, the long-term credit lines drawn down were also repaid. As of June 30, 2017, there are now Schuldschein loans in the amount of 1,008.5 million (December 31, 2016: million) with a term to April 2018 ( 70.5 million), to October 2018 ( million), to October 2020 ( million), to May 2021 ( 11.5 million), to May 2022 ( million), to May 2023 ( 72.0 million) and to May 2024 ( million). In addition, we are able to utilize credit facilities in the amount of 1,500.0 million. Drawdowns of these will become due for repayment in July Both the Schuldschein loans and the credit facilities may be used either for general business purposes or for financing acquisitions. As of June 30, 2017, million (December 31, 2016: million) of the existing longterm credit facilities ( 1,500.0 million) were utilized. The total available amount of unutilized short-term and longterm credit facilities was 1,060.0 million on the reporting date (December 31, 2016: million). Financial position The consolidated assets were 6,408.0 million, and therefore slightly lower than at the end of 2016 ( 6,456.2 million). As a consequence of the sale of the Axel-Springer- Passage to be completed by the end of the year, the carrying amounts of million (property, plant, and equipment) and 29.8 million (investment property) were reclassified to the balance sheet item assets held for sale. Equity amounted to 2,499.4 million and was therefore below prior-year status at the end of 2016 (PY: 2,638.6 million). In addition to dividend distributions to Axel Springer SE shareholders, the decrease resulted in particular from the currency translation of consolidated financial statements. In contrast to this, the consolidated 11

13 Interim Management Report net income generated had an increasing effect. The equity ratio decreased slightly to 39.0 % (PY: 40.9 %). The increase in non-current provisions and liabilities was, in particular, attributable to the increase in our financing volumes within the context of the reorganisation of the Schuldschein loan in May 2017 (for further remarks please refer to Liquidity ). In contrast to this, the other provisions and other liabilities were reduced, in particular through utilization of bonus provisions, declining restructuring measures and payments made in connection with the exercise of option rights to aquire remaining noncontrolling interests in Immoweb and Onet. Explanations with respect to the relevant key performance indicators In accordance with the International Financial Reporting Standards (IFRS), the performance indicators used in this interim financial report, EBITDA (earnings before interest, taxes, depreciation, and amortization), EBITDA margin, EBIT (earnings before interest and taxes), adjusted net income, adjusted earnings per share, free cash flow, net debt / liquidity and equity ratio are undefined performance indicators to be regarded as additional information. The definitions in the 2016 Annual Report on page 35 apply unchanged. Axel Springer share and investor relations Share In the first half of 2017, the Axel Springer share significantly outperformed the comparison indices and, at the end of the reporting period, was at and therefore 14.0 % above the share price at the beginning of the year ( 46.13). The highest price at the beginning of June was The DAX, the German benchmark index, closed the same period with a plus of 4.5 %. The MDAX, in which the Axel Springer shares are included, rose by 7.9 %. The DJ EuroStoxx Media, which reflects the key European media shares, generated a plus of 4.7 %. Share Information H1/2017 H1/2016 Change 1) Explanations regarding relevant key performance indicators on page 35 of the Annual Report ) Calculation based on average weighted shares outstanding in the reporting period (107.9 million; PY: million). 3) Based on shares outstanding at the closing price, excluding treasury shares (107.9 million; PY: million). Currently, 18 brokers publish analyses regarding the Axel Springer share. A total of nine brokers are expressing a buy recommendation for the Axel Springer share, eight recommend hold/neutral and one broker recommends sell/underweight. You can find the latest recommendations and share price targets in the Investor Relations section at 12

14 Interim Management Report Information on Listing Investor Relations In the first six months of the fiscal year, we participated in three investor conferences in New York, London and Frankfurt. Furthermore, we have presented the company on road shows in New York, Boston, London, and Frankfurt. Moreover, we have conducted numerous meetings with investors and analysts in Berlin. At the end of June, we also held two capital market days in London and New York for the first time, which were dedicated exclusively to the Classified Ad Models of Axel Springer. Almost all of the companies in the Classified Ad Models segment were represented with presentations by the top management. For the first time, in addition to detailed operational key figures for these companies, the revenues and earnings of the individual companies were disclosed. In future, this further increased transparency is to be provided on a half-yearly basis in order to make it even easier for the capital market to follow the development of our Classified Ad Models. The events were met with a high level of interest: A total of around 100 analysts and investors accepted the invitation on and participated on site. In addition, many market participants followed the live and later available on-demand video recording of the event. In the reporting period, as usual there were conference calls for investors and analysts at the publication of our annual report in March, as well as on the occasion of the publication of the results of the first quarter in May. These events could as usual also be followed directly as a live broadcast on the Internet. The audio recordings of these telephone conferences, as well as all accompanying financial reports and presentations, are further available on our website. Annual shareholders meeting The annual shareholders' meeting of took place in Berlin on Wednesday, April 26, Approximately 410 shareholders or 87.5 % of voting capital participated. All resolutions proposed by the Management including the proposal to increase the dividend to 1.90 (PY: 1.80) per qualifying share were approved by majorities of at least 93.8 %. Based on the closing price of the company's share on the day before the annual shareholders' meeting, the dividend yield came to 3.6 %. The total dividend pay-out to our shareholders was million. This corresponds to a gain of 5.6 % compared with the prior-year figure. Employees Axel Springer employed an average of 15,664 employees during the reporting period (PY: 14,986) (excluding vocational trainees and journalism students). The 4.5 % increase over the corresponding prior-year period resulted mainly from the increase in the number of employees in the Classified Ad Models and Marketing Models segments, due to acquisitions and organic growth in these segments. Share ownership program In previous years, our management and employees had the opportunity to benefit directly from the appreciation of the company s value by participating in our share ownership program. To date, only the participation of employees of and its domestic subsidiaries has been possible. The existing share participation program was fundamentally revised, with the aim, among other things, of extending the number of eligible persons to a larger number of companies belonging to the group, as well as international businesses. The new program was launched in July 2017 and will be gradually extended in the following years. Authorized employees can acquire 13

15 Interim Management Report shares on a monthly basis on their basic salary and will receive a subsidy granted in shares in the amount of 30 % in December. The subsequent holding period is two years. Report on risks and opportunities Compared to the disclosures in the 2016 Annual Report, the risk and opportunities profile for Axel Springer has not changed significantly. Despite the changes in individual risk positions, the overall risk situation has remained stable and there are currently no obvious risks that could jeopardize the continued existence of Axel Springer. Forecast report General economic environment In July 2017, the International Monetary Fund (IMF) forecasted a growth of 3.5 % in the global economy for the full year The IMF therefore remained in its assessment of spring of However, there are significant shifts. While the estimates for the US and the UK have been somewhat reduced, estimates for many other European countries are more optimistic. The ifo Institute expects a continuation of the upward trend in Germany. Against the background of the strong year opening of the economy, the institute increased its growth forecast for On average over 2017, the general economic environment should expand by 1.8 % and thus should grow at a slightly slower pace than in the prior year (1.9 %). In view of further capacity utilization and continuing good financing conditions, price-adjusted company investment in new buildings and equipment is expected to grow by 2.3 %. The economic researchers also expect an increase in real private consumption of 1.2 %. Foreign trade is projected to expand significantly. Accordingly, the growth in exports will be 4.4 % in real terms. In the case of imports, due to the internal economic dynamism, a priceadjusted increase of 4.5 % is also to be expected. The consumer prices are likely to continue to move upwards in According to the ifo forecast, increasing labor costs and rents will allow the inflation rate to increase in 2017 to 1.7 %. The unemployment rate is expected to fall to 5.7 % due to the continuing growth in employment. At the same time, the number of people employed will increase by almost 600,000. On average for 2017 the ifo Institute expects around 44.2 million people to be in employment. The IMF estimates this growth in the Eurozone this year at 1.9 %, which is mainly due to developments in Spain, Italy, Germany and France. The IMF, on the other hand, estimates the US growth to be only 2.1 % this year due to uncertainties about US financial and economic policy. In April, the estimate amounted to 2.3 %. The economic consequences of Brexit also appear to be visible in the UK. 14

16 Interim Management Report Anticipated Economic Development (Selection) Change in gross domestic product compared to prior year (real) 2017 According to the current advertising market forecast by ZenithOptimedia an increase of 4.2 % (nominal) is expected worldwide for ZenithOptimedia thus corrected its forecast of % in March 2017 slightly downwards. ZenithOptimedia sees this projected development in particular against the background of the upcoming Brexit negotiations in the UK as well as the political uncertainty in the U.S. in connection with the risk of trade restrictions which could have a long-term negative effect on the consumer climate. At the same time, the challenges facing the industry and in particular the pressure to digitize, growing fragmentation of the advertising media market and the resulting high intensity of inter-media competition are worth noting. Source: ifo Institute, June ) Source: IMF, July ) Source: IMF, April A forecast published by the German Institute for Economic Research (DIW) is positive about the countries in central and Eastern Europe. Rising real wages and falling unemployment has a predominantly supportive effect on consumption. Investment activity is expected to gain momentum again with the launch of the EU funding lines and in an environment of lower interest rates. In total, the DIW expects real growth in Central and Eastern Europe in 2017 of around 3.6 %. Industry environment In the 2017 federal election year, Germany is generally expected to see further growth in advertising budgets, although growth could weaken slightly compared with Currently available forecasts for Germany predict mixed developments for the different types of media. Zenith Optimedia expects net advertising market revenue (advertising revenues net of rebates and agent s commission) in Germany for 2017 to increase by 2.5 % (nominal). Thus, the total advertising market will not grow as fast as the general economy, which is expected to expand at a nominal rate of 3.1 % (+ 1.8 % in real terms) according to the ifo Institute. The advertising market growth is driven by digital ( %), TV (+ 2.1 %), radio (+ 1.6 %) and outdoor (+ 1.5 %). ZenithOptimedia is predicting a drop in net advertising revenues for newspapers of ( 3.0 %) and magazines ( 6.0 %). The forecast data also reflects the structural shift of advertising expenditures, especially in favor of digital platforms. The proportion of total advertising expenditures targeted to online and mobile platforms will rise further. Global trends also set the tone for Germany. Growth in the advertising market is technology-driven, particularly in the mobile, online moving images (video) and programmatic growth segments. Due to the continued spread of mobile devices, technical improvements in advertising forms and increase in the variety of advertising forms, and technical 15

17 Interim Management Report innovations in controlling multi-device campaigns, considerable growth in advertising expenditure is expected. Progressive automation of an advertising booking via programmatic buying platforms is also seen as a driver for online and mobile advertising. ZenithOptimedia s forecast for the international markets in which Axel Springer conducts business through its own business activities paints a mixed picture. In 2017, the net advertising volume of the online market in Western Europe will increase by 8.3 % to USD 39.6 billion, based on the assumption of consistent exchange rates. Anticipated Advertising Activity 2017 (Selection) Change in net ad revenues compared to prior year (nominal) Online Print Axel Springer Strategic orientation The highest strategic priority for Axel Springer is to pursue the consistent digitization of our business. We aim to attain the goal of becoming the leading digital publisher by further developing our digital offerings in Germany and abroad, and by making targeted acquisitions. Anticipated business developments and financial performance of the Group For the 2017 fiscal year, we expect Group revenues to increase by an amount in the mid single-digit percentage range. We assume that the planned increase in advertising revenues will overcompensate the slight decline in circulation revenues and the decline in other revenues. After a very good first half of the year, we expect an increase in EBITDA in the high single-digit percentage range, having previously expected a rise in the mid to high single-digit percentage range. We continue to expect a rise in EBITDA in the Classified Ad Models and Marketing Models segments, while the earnings in the Paid Models segment should be roughly on par with the prior year-level. For the Services/Holding segment an EBITDA below the prior-year level is expected. For EBIT, due to higher depreciation, amortization and impairments, we expect an increase in the mid to high single-digit percentage range, having previously expected an increase in the mid single-digit percentage range. For the adjusted earnings per share, we now also expect a rise in the high single-digit percentage range, having previously expected an increase in the mid to high single-digit percentage range. Source: ZenithOptimedia, Advertising Expenditure Forecast, June ) Excluding Classified ads, that means exclusively sales from display advertising. 2) Gross advertising revenues (excluding classified ads). 16

18 Interim Management Report Anticipated business developments and financial performance of the segments The revenues of the Classified Ad Models segment are expected to show a rise in the low double-digit percentage range mainly due to organic growth. We expect EBITDA to increase in the low double-digit percentage range, despite increased investments in IT, marketing and sales. In the Paid Models segment we expect revenues to be roughly on par with the prior-year level for the 2017 financial year. For circulation revenues, we expect an amount slightly below the prior-year level. For advertising revenues, we anticipate an increase, while we expect other revenues to be below the prior-year figure. For EBITDA, we expect a stable development. We assume that the growth in digital activities and declining launch costs for developing new businesses will compensate for the decline in the print business. We expect revenues in the Marketing Models segment to increase by an amount in the high single-digit to low double-digit percentage range, based on the anticipated growth in advertising and other revenues. For EBITDA, we also expect an increase in the high single-digit to low double-digit percentage range. For the Services/Holding segment, we expect a considerable decline in revenues due to decreasing printing plant revenues and lower rental revenues in connection with the sale of parts of the building on the Hamburg site. For EBITDA, we therefore expect a significant deterioration compared with the prior year. For EBIT, we expect developments in the Paid Models segment to be similar to those of EBITDA, and for the Services/Holding segment, due to lower depreciation, we expect less of a decline than for EBITDA compared with the prior year. In the Classified Ad Model segment, EBIT development will be significantly below the EBITDA trend due to higher depreciation, amortization and impairments, while for Marketing Models it will be slightly below the EBITDA trend. Anticipated liquidity and financial position With regard to liquidity and financial position, investments in property, plant and equipment and intangible assets will be significantly above the prior-year level, mainly due to investments in the new headquarter building in Berlin. Financing will be provided by operating cash flow. Excluding the investments for the new headquarter building in Berlin, investments are also expected to be significantly above the prior-year figure. Dividend policy Subject to the condition of continued sound financial performance in the future, Axel Springer will pursue a dividend policy of stable or slightly increased dividend distribution, while also allowing for the financing of growth. Anticipated development of the workforce The average full-year number of employees for the Group in 2017 will be higher than the prior year. This is mainly due to organic growth and acquisitions in connection with the digital transformation of the Group s business. Planning assumptions We plan the future development of the financial performance, liquidity, and financial position on the basis of assumptions that are plausible and sufficiently probable from today s perspective. However, actual developments could possibly be much different from the assumptions applied and thus from the business plans and trend forecasts prepared on the basis of those assumptions. Basically, the forecast is based on the assumption that no significant deterioration in the economic environment will follow and that the actual exchange rates do not deviate significantly from the underlying assumed exchange rates. The forecasts for EBITDA, EBIT, and the adjusted earnings per share do not reflect any effects resulting from possible future acquisitions, divestitures, and capital measures or from unplanned restructuring expenses. 17

19 Notes Consolidated Statement of Financial Position millions ASSETS 06/30/ /31/2016 Non-current assets 5, ,393.0 Intangible assets 4, ,162.3 Property, plant, and equipment Investment property Non-current financial assets Investments accounted for using the equity method Other non-current financial assets Receivables due from related parties Receivables from income taxes Other assets Deferred tax assets Current assets 1, ,063.2 Inventories Trade receivables Receivables due from related parties Receivables from income taxes Other assets Cash and cash equivalents Assets held for sale Total assets 6, ,

20 Notes millions EQUITY AND LIABILITIES 06/30/ /31/2016 Equity 2, ,638.6 Shareholders of 2, ,217.4 Non-controlling interests Non-current provisions and liabilities 2, ,427.2 Provisions for pensions Other provisions Financial liabilities 1, ,258.3 Trade payables Liabilities due to related parties Other liabilities Deferred tax liabilities Current provisions and liabilities 1, ,390.4 Provisions for pensions Other provisions Financial liabilities Trade payables Liabilities due to related parties Liabilities from income taxes Other liabilities Total equity and liabilities 6, ,

21 Notes Consolidated Statement of Comprehensive Income millions Consolidated Income Statement Q2/2017 Q2/2016 H1/2017 H1/2016 Revenues , ,585.3 Other operating income Change in inventories and internal costs capitalized Purchased goods and services Personnel expenses Depreciation, amortization, and impairments Other operating expenses Income from investments Result from investments accounted for using the equity method Other investment income Financial result Income taxes Net income Net income attributable to shareholders of Net income attributable to non-controlling interests Basic/diluted earnings per share (in ) millions Consolidated Statement of Recognized Income and Expenses Q2/2017 Q2/2016 H1/2017 H1/2016 Net income Actuarial gains/losses from defined benefit pension obligations Items that may not be reclassified into the income statement in future periods (after taxes) Currency translation differences Changes in fair value of available-for-sale financial assets Changes in fair value of derivatives in cash flow hedges Items that may be reclassified into the income statement in future periods if certain criteria are met (after taxes) Other income/loss Comprehensive income Comprehensive income attributable to shareholders of Comprehensive income attributable to non-controlling interests